Correlation Between Ab Small and Champlain Small

Can any of the company-specific risk be diversified away by investing in both Ab Small and Champlain Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ab Small and Champlain Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Small Cap and Champlain Small, you can compare the effects of market volatilities on Ab Small and Champlain Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ab Small with a short position of Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Champlain Small.

Diversification Opportunities for Ab Small and Champlain Small

0.79

Correlation Coefficient

Ab Small  Champlain Small

Poor diversification

The 3 months correlation between QUAZX and Champlain is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small and Ab Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ab Small Cap are associated (or correlated) with Champlain Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Small has no effect on the direction of Ab Small i.e., Ab Small and Champlain Small go up and down completely randomly.

Pair Corralation between Ab Small and Champlain Small

Assuming the 90 days horizon Ab Small is expected to generate 18.84 times less return on investment than Champlain Small. In addition to that, Ab Small is 1.02 times more volatile than Champlain Small. It trades about 0.01 of its total potential returns per unit of risk. Champlain Small is currently generating about 0.2 per unit of volatility. If you would invest  2,294  in Champlain Small on August 21, 2024 and sell it today you would earn a total of  154.00  from holding Champlain Small or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Ab Small Cap  vs.  Champlain Small

Ab Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Champlain Small

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Champlain Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ab Small and Champlain Small

The main advantage of trading using opposite Ab Small and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Small position performs unexpectedly, Champlain Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Champlain Small will offset losses from the drop in Champlain Small's long position.

The idea behind Ab Small Cap and Champlain Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.